Vernon Smith Prize 2017: Winners announced

Vernon Smith Prize 2016 Call for Papers
Does Tolerance become a crime when applied to evil? Vernon Smith Prize 2017.

Vernon Smith Prize 2017
Winners announced

The 10th International Vernon Smith Prize for the Advancement of Austrian Economics was an essay competition sponsored and organized by ECAEF European Center of Austrian Economics Foundation, Vaduz (Principality of Liechtenstein). This years’ topic: Does Tolerance become a Crime when applied to Evil? The winners are:

1: Mattias Oppold (Germany)

PhD Student of Economics, at TU Kaiserslautern

|- First Prize EUR 4,000 -|

2: Marcos Falcone (Argentina)

Fullbright Student at the University of Tennessee, Knoxville

|- Second Prize EUR 3,000 -|

3: Richard Mason (UK)

Student at Maastricht University Faculty of Arts and Social Sciences

|- Third Prize EUR 2,000 -|

Does Tolerance become a Crime when applied to Evil? Advanced by the ‘ends-independent’ market process, free pluralistic societies developed without a shared hierarchy of particular ends. Once we agree on the rules, we need not agree on the goals as markets enable us to disagree peacefully while we pursue our own way. However, to sustain this kind of ’means- but not ‘ends-connected’ society, we must be willing to tolerate differences with others and we have to recognize that our freedom to achieve our ends comes at the cost of allowing others the same, even if we find those ends distasteful.

ECAEF invited papers on this topic in 2017. The winners are now invited to present their papers at a special event in Vaduz, Principality of Liechtenstein, in February, 2018. These are their abstracts:

1. Prize: Mattias Oppold

Does Tolerance Become a Crime when Applied to Evil? The subject of this paper is the need for tolerance within society and its moral limitations. The examination of this subject will include three parts. The first part will address the general conditions of morality based on the philosophy of IMMANUEL KANT. It will be stressed that morality paradoxically compels to a toleration of evil. The second part will address the general conditions for coherence in human society according to the legal theory of DAVID HUME. This theory will give an evidence that humans could unlikely continue as an intelligent, and potentially moral, species without having three principles of justice established in their culture. The third part of the paper will question the moral normativity of these principles in the light of KANT’s system, assuming that their legal implementation were unequivocal. A consideration of two general effects that a single transgression of justice may produce will lead to the paradox that morality can allow the committing of a legal crime but never its toleration when such a crime is committed by others. The paper’s conclusion will be that tolerance is not a crime when applied to evil, but rather evil when applied to crime …

2. Prize: Marcos Falcone

Does Tolerance Become a Crime When Applied to Evil? Yes, When the Government Shows Up. Though free, pluralistic societies develop continuously without a shared hierarchy of particular ends, this does not take into account what such a system exists for in the first place. Its goals, this paper argues, must be analyzed in order to answer the question of whether ‘tolerance’ becomes a crime when applied to evil. Such an analysis, in turn, can be made more complex by applying the question to individuals or governments. It can be concluded that, while no individual could ever be charged with a crime of the sort, governments certainly can be, according to their own rules, if their citizens’ freedoms become impaired by policy-making based on ‘tolerance’ …

3. Prize: Richard Mason

Legal Tolerance, Non-legal Intolerance, and the Marketplace of Ideas | The debate over tolerance and its place in democratic society has made a strong comeback in recent years. With politics in society becoming ever more dominated by the influences of the ‘Alt Right’ and ‘Alt Left’ calls for the punching of nazis¨ and shifts towards tribal argumentation we are once more forced to reexamine Western society’s approach to free speech, democracy and toleration of extreme ideas. Must we be intolerant of intolerant ideas if we are to preserve our tolerant society? Is freedom of speech still a guaranteeable right? Through analysis of key philosophical approaches to tolerance application of economic principles to theories of tolerations¨ and analysis of contemporary and historical examples this paper aims to demonstrate how a combination of legal toleration and non-legal intolerance provides an effective buttress against intolerance without the need to infringe on fundamental rights …

ECAEF wishes a peaceful 2018

ecaef peaceful 2018
ECAEF Peaceful 2018

We all at ECAEF wish you Merry Christmas and the Very Best in a Peaceful  2018. Please safe the dates:

Feb. 5, 2018:
International Vernon Smith Prize
Winner Ceremony

May 25, 2018:
15. International Gottfried von Haberler Conference
Topic: “Karl Marx, born in 1818 and Still Going Strong?”

Dec. 6, 2018:

Could Digital Currencies Make Hayek’s Denationalization of Money Dream Come True?

by Dr. Emanuele Canegrati (Italy)
Fellow Liechtenstein Academy

Could Digital Currencies Make Hayek’s Denationalization of Money Dream Come True? And can a basket of cryptocurrencies be the new world monetary basis? Perhaps it is too early to answer these questions, as the cryptocurrencies and the blockchain revolution is only at its very beginning and digital moneys such as Bitcoin or Litecoin are still considered by many famous economists and investors only as a big financial bubble ready to burst. But, left aside all the speculation-related issues, that certainly surround the current digital currencies market, one may be brave and answer in a positive way. In his best-seller book “The Denationalization of Money” (1976) Friedrich Hayek expressed his thoughts about the role of currencies, by advocating the establishment of competitively issued private moneys, against the public money issued by central banks. Those central banks that still have the decisional monopoly power on money today.

could digital currencies make hayeks denationalization of money dream come true
Could digital currencies make Hayek’s denationalization of money dream come true?

In 1978 Hayek published also a revised and enlarged edition of the book entitled “Denationalization of Money: The Argument Refined”, where he proposed a monetary system where, rather than entertaining an unmanageable number of currencies, markets would converge on one or only a limited number of monetary standards. According to Hayek’s idea, private business should be given the opportunity to issue their own private currencies, which, thanks to the free market mechanisms, would compete for acceptance. The acceptance of a currency is given by its reaching the stability in value, as competition tends to favor currencies with the greatest stability, since currency devaluation hurts creditors, while a revaluation hurts debtors. Therefore, stability emerges as a “spontaneous order” of the market, rather than through a political decision made by central bankers, through the “monetary policies”, for whatever they mean. Hence, customer-citizens would choose the monies which they expected to offer a mutually acceptable intersection between depreciation and appreciation. Hayek maintained also that institutions may find through experimentation that a basket of commodities forms the ideal monetary base. Institutions would issue and regulate their currency primarily through loan-making, and secondarily through currency buying and selling activities. It is postulated that the financial press would report daily information on whether institutions are managing their currencies within a previously-defined tolerance.

If we analyze now the market of cryptocurrencies, we can easily observe the presence of many elements characterizing the Hayekean monetary world. First of all, private issuing. Digital currencies are completely issued trough a private mechanism, linked to the computerized mining process, which is somehow comparable with the more classic gold mining. And, yes, Bitcoin has often been assimilated to gold. Of course, there is a huge difference between the precious metal and a digital currency, as the first is a metal, with specific features such as brilliance, durability, beauty and preservability over time, which of course a digital currency does not possess. Nevertheless, cryptocurrencies could have a common feature with gold, which makes them candidates for being the base of a monetary system: scaresness. According to Bitcoin creators, the most famous digital currency of the world should be issued in the limited quantity of 21 million. Not a bitcoin more. Once the total quantity would be achieved, the skyrocketing price should stabilize or change according to the demand/supply law. Gold, as well, is limited, although nobody can quantify its precise quantity. We only know that this quantity is finite.

The ability of digital currencies to be used as a medium of exchange, in finite quantities and in a decentralized issuance could make them suitable for being the base of a libertarian monetary system. Of course, they are not perfect monies, as one may argue that they can be stolen by hakers from savers’ digital wallets, their limit may be raised by miners’ decisions and so on. We are just at the very beginning of what could be a monetary revolution. Only time will demonstrate if these new currencies will be adopted as the new world monetary standard or they will disappear as fast as they has been introduced. And, yet, after having seen the disasters committed by central bankers through their “ultra-expansionary” monetary policies (read, print fiat money as much as you can) these new instruments deserve a chance.

II. ECAEF/CEPROM Conference, Monaco

November 23, 2017

A Case for Europe’s Small States
in the third Millennium

An academic Cooperation of CEPROM and ECAEF

The II. ECAEF/CEPROM Conference (International Jacques Rueff Conference) was an academic one-day co-operation of CEPROM (Center of Economic Research for Monaco) and ECAEF (European Center of Austrian Economics Foundation, Liechtenstein). It took place at the Musee Oceanographique de Monaco, Principality of Monaco, on November 23, 2017.

Introduction by Kurt Leube | Defined in broad terms the small states of Europe are countries that have little territories and small populations – usually both – but enjoy sovereignty, international recognition and share all or at least most of the features of larger states. This differentiates them from other small political entities such as overseas territories or special administrative regions.

Europe is home to the five smallest continental states in the world that have been autonomous or independent for most of their centuries long history and were rarely invaded: Vatican City, Monaco, San Marino, Liechtenstein and Andorra. The majority of them ranks among the most prosperous states in the world. Though, more often than not these small states were situated in places, unattractive to larger surrounding nations and repeatedly military powers left them more or less alone, sometimes for centuries. However, geography alone was not enough to allow small states to survive for centuries on a tumultuous continent. Their development and endurance are mostly due to at least four major factors: Political genius, legal systems that serve the people, accountability and trade.

ecaef ceprom conference monaco
Jacques Rueff (1896-1973) 7th Minister of State of Monaco

Due to the fact that small states are more flexible, more able to weather economic storms, and less capable of waging serious wars, they are more accountable to their people and more creative. It seems to be no coincidence that on the whole there is more entrepreneurial spirit, individual freedom or trustworthiness to be found among the people living in small states. These virtues can only be discovered and self-responsibility practiced in matters with which most residents are familiar and where the consciousness of one’s neighbor rather than some distant knowledge of the need of other people, guides their actions. Citizens will typically take an actual part in public affairs only when they concern their own social and physical environment. However, the faster these feelings of social cohesion between individuals or groups dry up the resolution of social problems will increasingly be assigned to an omnipotent and thus inevitably intrusive bureaucracy. Where the range of political measures expands beyond an endurable size and swell so large that the necessary knowledge to cope with them is more or less under the control of a huge administration, the commitment and creative ideas of private persons must necessarily fade away.

However, the recent quelling of secessionist movements reveals Europe’s different course. Europe (i.e. the EU) seems to be bound to spread out even more of the toxic effects of centralization, synchronization or redistribution. The thinly veiled duplicity of routinely used words makes it easier for policy makers of large political unions to ever expand the role of an all-powerful government. By ways of progressively pushing for more harmonization and centralization of tax issues and welfare or of forcing people to abandon their local customs, rights and traditions, Europe not only surrenders her classical liberal heritage. In its current course, the EU is also bound to destroy Europe’s vital remnants of individual freedom, competing markets and her entrepreneurial spirit.

To understand the prophetic power of Friedrich A. von Hayek’s (1899-1992) vision, we need to ponder about his statement that serves as subtitle for the conference. To his quotation “We shall all be the gainers if we can create a world fit for small states to live in”, we should not only add that minimizing the aggregation of power would also make us safer. We should also oppose the making of ever-larger political alliances, in the belief that this will bring peace and security.

At the recent II. International ECAEF/CEPROM Conference in Monaco, some of the internationally most renowned scholars and experts in the field have analyzed and discussed the philosophical underpinnings, the current condition and the future of the European Small States. The following papers for download are in the original version and have not been edited.

Kurt Leube
Academic Director of the conference

You can download the conference papers:

Dinner Speech
by Detmar Doering

Small, Sovereign and Resilient: Lessons from the not-so wild Wild West
by Terry L. Anderson

Decentralization, Subsidiarity, Secession: States in Knowledge-Based Societies
by Karl Peter Schwarz

Is Small Still Beautiful? A Swiss Perspective
by Henrique Schneider

Limited Places offer Unlimited Thoughts
by Carlos Gebauer

Small States
by Michel Hunault

Reflections on Smallness
by Antonio Martino

Stop Dragging Hayek into Bitcoin

by Paul Butler

When monetary theory comes up in reference to Bitcoin, the work of Friedrich von Hayek is often invoked. I have read a number of claims that the Nobel laureate’s 1976 book, Denationalisation of Money,1 lays the theoretical foundation for the cryptocurrencies we see today.

In this post, I will argue that the similarities between Hayek’s hypothetical currencies and Bitcoin are merely superficial, and that the technology behind cryptocurrencies is not a substitute for intentional design decisions in Hayek’s proposal.

The Ducat

Hayek’s central point in Denationalisation of Money is that there is no innate reason for governments to have a monopoly on money. He makes the case that private banks should be able to issue their own currencies, creating a competitive market for the issuance and control of these currencies. The argument goes that demand will be greatest for currencies which are capable of keeping a stable value, and so banks will strive to manage the monetary supply more responsibly than governments do.

Hayek makes his argument through the construction of a hypothetical currency which he calls the ducat. The ducat is nominally backed by government currency.2 More importantly, it is also backed by the issuer’s promise (with reputational, but not legal, consequences) to keep its purchasing power approximately stable relative to a commodity index.

This price stability is to be accomplished through the standard means of monetary control: when the price of the ducat exceeds the desired purchasing power, more ducats are printed and sold until the price drops to the promised purchasing power. Likewise, when the price of ducats drops below the desired purchasing power, the bank buys back notes until it is restored. As there is market pressure to do this well, the currencies picked by the market will be the ones that are functionally commodity-backed, even if none of them are in name.

Note that when the issuing bank sells their ducats, to make good on their promise to maintain a stable value, they can’t just pocket the money and forget about it. Instead, they must invest the money responsibly so that they can buy back ducats when the need arises.3 This is essential since a diligent consumer, choosing between currencies, will consider the solvency of the banks who issued them.

Continue reading ->
“Stop Dragging Hayek into Bitcoin” by by Paul Butler


Note: This post discusses the relationship between Hayek’s work and cryptocurrencies, and is not financial advice. Opinions are the author’s own. Paul Butler does not hold a position in Bitcoin or other cryptocurrencies.